ECB Executive Board member Isabel Schnabel said the Eurozone’s disinflation process remains on track, but “new shocks” — particularly from trade tariffs — are presenting emerging risks.

While tariffs may dampen inflation in the short term, Schnabel warned they pose medium-term upside risks, warranting a “steady hand” in monetary policy.

She emphasized the importance of not overlooking “supply-side shocks” if they appear persistent, as doing so could risk “de-anchoring inflation expectations”.

Schnabel also highlighted the Eurozone’s relative resilience following the tariff escalation on April 2, noting Euro’s appreciation and a shift in perception toward the region as a “safe haven.” She characterized this as a “historical opportunity” to strengthen the international role of Euro.

ECB President Christine Lagarde has described the Euro’s recent appreciation against Dollar as “counter-intuitive,” but ultimately a reflection of growing global unease over US political and economic direction.

In an interview with La Tribune Dimanche, Lagarde said that parts of the financial markets appear to be “losing confidence” in the US, due to economic and financial chaos during the first 100 days of President Donald Trump’s term.

By contrast, Lagarde highlighted Europe’s comparative stability, both economic and institutional, as a key driver behind the Euro’s unexpected strength.

“Uncertainty is a constant [in the US],” she noted, while Europe is being recognized as “a stable economic and political region with a solid currency and an independent central bank.”

That divergence in perceived reliability, she argues, has led markets to favor the Euro even in a climate where risk aversion would normally boost Dollar.

Full interview of ECB’s Lagarde here.

Latvian ECB Governing Council member Martins Kazaks indicated market pricing of a 25bps cut at the June 5 meeting is “relatively appropriate”.

Nevertheless, speaking to CNBC, Kazaks added that inflation developments are “by and large within the baseline scenario”. Thus, ECB is “relatively close to the terminal rate” of its easing cycle.

Kazaks’ comments argue that ECB may enter a phase of pause after the June rate cut.

Meanwhile, French Governing Council member Francois Villeroy de Galhau, in an interview with a regional French newspapers, acknowledged the risk of a trade war but dismissed the notion that central banks are currently engaged in a currency war.

Villeroy defined a currency war as using interest rates competitively to gain economic advantage. Instead, he said recent currency movements are more reflective of “revisions to economic forecasts.”